All Topics / Help Needed! / Buy second land or not

Viewing 6 posts - 1 through 6 (of 6 total)
  • Profile photo of SonnySonny
    Participant
    @s9nny
    Join Date: 2016
    Post Count: 5

    Hi,

    I’d like some expert view if it is a goid idea buy second land whilst building our first home.

    First home build will start in 2 months.

    The developer is offering 10% deposit on 2nd land with no payment for 2 years.

    I figured it’s a good oppotunity as 2 years will allow us to save, land value will go up as well as our first home.

    If it’s a yes, how should we arrange 2nd mortgage.

    I am the only one working $80k/yr with 2 kids.

    Thank you in advance.

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,416

    Hi Sonny,

    I have heard of others (experienced investors) who buy land when the prices are good, and more than one at a time. The major question really is “Are these land blocks really good deals?” Much of that answer will depend on who is developing them. Although I’m sure there are a host of good, honest business people doing good deals, the whole H&L scenario can also have its share of sharks.

    Is your goal to develop that block as an IP? If yes, then what? Will you hold or sell? Is the plan to provide a chunk of cash at the end of it? Or do you plan to keep it as an Income source while (hopefully) having it grow in value?

    Keep in mind that “greenfield estates” can be built in areas where there is heaps of land surrounding, and little to entice people to buy there (e.g. Pimpama or Yarrabilba in SEQ). They can be small blocks and any chance of Capital Growth could be a decade away. But then, if in a tightly-held city area (e.g. a farmer sold their farm in suburbia, this development has nowhere to continue once sold out, is in a major city and infrastructure is already in situ…) then the prospects of Capital Growth COULD be huge.

    So much depends on just what and where you are looking, and at what price…. Caution is advised UNLESS you know heaps about the future prospects of this area. The fact that you are building a home there means it has at least some good things going for it. ;)

    From the finance side, if values were to drop, you might be struggling to settle on your home (the Bank might require you to provide a larger cash deposit). Perhaps for that reason alone, it may be wise to hold back on the second block…. but let’s see what thoughts come from others in reply….

    Benny

    Profile photo of Colin RiceColin Rice
    Participant
    @fms
    Join Date: 2011
    Post Count: 338

    If it’s a yes, how should we arrange 2nd mortgage.

    You would need to talk to an investment savvy mortgage broker to map out a suitable finance structure. If done wrong it could cause some pain.

    As @benny has already mentioned you would want to do your research (or pay a professional to do it) so you understand the current dynamics and how this will effect the future value of the land you are considering purchasing.

    • This reply was modified 5 years, 4 months ago by Profile photo of Colin Rice Colin Rice.

    Colin Rice | CDR Finance
    http://cdrfinance.com.au/
    Email Me | Phone Me

    Perth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    I am the only one working $80k/yr with 2 kids.

    Without knowing the finer details of your situation – this sentence here suggests that borrowing capacity is probably going to be quite tight.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    Be careful to assume land prices will rise during the time. Being your first home and a single income with dependents, you may want to consider that it would be prudent to wait until you’ve settled into your new home and then recheck your budget to see if you can afford the investment. The last thing you want to do is sink your hard earned savings into a deposit on land which could cause financial stress.

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of SonnySonny
    Participant
    @s9nny
    Join Date: 2016
    Post Count: 5

    Thank you all for taking the time to reply. I really do appreciate it.

    My plan was to buy now an build an investment property and hold it – Rent it out.

    With your invaluable inputs, i will wait until we are settled down for a few years and reassess our plan then.

    Thanks again.

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